A quick outline
Whether it’s your first time flipping a house or you’re a seasoned investor, there is certain information you’ll need from your contractor and an easy way to get this is by lining up the most important questions. So, to help real estate investors doing fix and flip projects, we’ve put together 20 questions to ask your contractor before hiring them.
Most real estate investors will need to hire a general contractor at some point along their investing journey. Whether your strategy is to fix and flip properties or to buy and rent, it’s likely that a certain number of renovations will be needed and that’s when you’ll need to get a contractor involved. Your choice of contractor can make or break the project and effectively the deal itself, so it’s key to choose the right contractor who will do the best job.
20 questions to ask your contractor before hiring them
For real estate investors who are doing renovations or ground-up construction projects, there are a host of decisions to be made along the journey and many of these can be made easier with the information upfront. It’s crucial to the success of your project to assemble the right team who will not only stick to the budget, but who will also do their best work and see the project through to the end.
So, when you’re in the initial phase of your project, it’s important to choose the right contractor who will be the best fit for your needs. To help you with this, we’ve put together 20 of the most fundamental questions that you should ask a contractor, to help you decide who would be right for your project.
1. Are you licensed?
Finding a contractor who is licensed is a non-negotiable for anyone doing construction or renovations. The building industry has specific licenses for contractors and if your contractor is licensed, they should be able to provide you with a copy of this license which you can check with the issuing authority. This license is often issued by the state, and you can follow up with the state licensing board for contractors in your area.
2. Do you have a list of references that I can contact?
The best way to get a gauge for a contractor’s work is to get in touch with people they have previously worked with. You should ask about the project timelines, the work that was done, and whether the contractor stuck to the budget. You can include any other questions you might have that would help you figure out if the contractor is right for your particular project. A contractor should have multiple references that you can contact, and their experiences with the contractor will help you make your decision.
3. How long have you been in this industry?
A contractor who has been working in the industry long enough to have accumulated a number of references is an ideal candidate for a project that requires experience. A proven track record can be an essential tool for you when you are choosing a reliable contractor. Make sure that your contractor has a history in the industry, which will invariably mean that they have experienced many different situations and know how to deal with them, should they arise in your project.
4. What type of insurance do you have?
An important factor to consider is whether the contractor has insurance or not. Workman’s comp is essential in case any of the workers injure themselves while working on your project. Every worker should be covered by insurance before they begin working on the project so that you don’t find yourself liable for anything. There should also be insurance for any damage that may be done to your home during the project, for example if a water pipe gets damaged by accident this can be a costly exercise.
5. How is the project supervised?
The supervision of the project can be vital to its completion in terms of budget and quality of workmanship. Whether the contractor themselves is present every day or not, it’s a good question to ask, so that you know who will be supervising the project and keeping everything on track. It’s often the case that the contractor will not be there every day.
6. How many building permits have you gotten in this area?
If the contractor has obtained many permits in the area over the last few years, this is a great sign. Not only does this show that they are credible, but it indicates that they are up to date on the building laws and codes for your area. These laws and codes are crucial to the success of the project, so a contractor who isn’t familiar with them can cause major issues for the project.
7. What is the timeline for the project?
You will most likely have a deadline for when the project needs to be completed by. You should communicate this to the contractor and get a timeline from them that is as accurate as possible, to see if this matches with the deadline you had in mind. Along with this, you can ask how many projects they are currently working on, so that you can make sure the timeline is realistic and if they are likely to complete the work by the deadline.
8. Who are your main suppliers?
Contractors typically have suppliers that they use for their projects and will keep using. Getting a list of these is a good way to begin researching their reliability and the quality of their products and services by doing a little research. Following up with the suppliers is also a good way to find out about a contractor’s professional reputation. A contractor should have no problem letting you know which suppliers they use, however if they are reluctant to tell you, this a potential red flag.
9. Can you provide an itemized quote?
Contractors often give you an estimate for a project that is a total number and doesn’t factor in each aspect of the project. However, it can be more useful to have an itemized quote so that you know how much each aspect of the project will cost and potentially tweak this to fit your budget. You can also use this when comparing the costs of each contractor you’re considering.
10. Do you provide any guarantees?
Check with the contractor whether they provide any guarantees for the work they’re doing. Some will provide a lifetime guarantee, which would be the best, and some provide shorter guarantees. Guarantees should be a deal breaker, when choosing a contractor, particularly for defective materials and workmanship problems. The guarantee should be done in writing, and outline exactly what the guarantee is for, and for how long it is valid.
11. Is a down payment required?
Some contractors will expect a down payment before they begin the project, which means that you’ll need to find out what is expected sooner rather than later. It’s a good idea not to let the down payments get ahead of the work though, and to make sure that the contractor is reliable before paying anything. It’s worth noting that a stable company more than likely won’t need cash upfront to cover their expenses as they will already have a good cash flow.
12. What’s the payment schedule?
Once you know about the down payment expectations, the payment schedule is the next logical question to ask. It’s an important part of the process for both parties because some contractors may require payment in increments over the project and some may require a bigger sum at the beginning and end. Either way, once you know the payment schedule you can budget accordingly or suggest another payment schedule if it doesn’t work for you, or even go to another contractor with a payment plan that works for you.
13. What is the typical work routine for the project?
You’ll want a contractor to give a specific daily work schedule so that you know when they’ll be on site, and whether the plan matches the timeline specified. This will indicate whether the contractor is likely to achieve your deadline or not. You’ll want the work schedule to be a regular 9-5 kind of schedule, with a lunch break. If this is not the case, it can mean that the contractor isn’t organized enough to plan the work routine, or they don’t intend to be on site on a regular basis. Either way, it’s best to know the work schedule ahead of time so that you can plan accordingly.
14. Do you foresee any challenges on this project?
It’s vital to know about any home renovation challenges that a contractor might see at the outset of the project. These can add extra time onto the project and cost more money so the sooner you know about them the better. Sometimes contractors can predict challenges right away, in which case its best to ask them and make sure that you know as soon as possible.
15. How often will you be visiting the site?
Knowing when your contractor is going to be around is another important piece of information. Contractors may not be on the site every single day, so make sure to ask them when they’ll be around, so that they can provide you with updates along the way. The more a contractor has their finger on the pulse, the closer you will often be to getting things done according to the timeline and getting the job done right. A contactor that isn’t frequently visiting the site should let you know why and have another plan in place, for example a site manager.
16. Do you provide a written lien waiver?
It’s important to get a lien document from a contractor at the end of the project because this is a legal document which states that you have paid in full for all the work that the contractor, and any sub-contractors did. Essentially, a written lien is a receipt for construction work that was done. It means that a lien cannot be filed on your property.
17. Who will be handling the permits?
For whole house renovations, particularly ones that impact the structure of a house, approval will be needed in the form of permits. Building permits differ in requirements depending on the state. Some states require HOA, county or city approval. Find out at the beginning of the project whether the contractor will be handling the permits or not. They should know the rules and regulations around permits and be able to advise you accordingly.
18. Can I get a detailed contract in writing?
Without a written contract that specifies what is required from the project, the payment, the materials needed, the timeline and a termination clause, you won’t be able to do much if the project doesn’t go according to plan or you lose money. As with most other business deals, getting a contract in writing is a crucial element of renovating or building a home.
19. Do you agree to a termination clause?
A termination clause in the written contract is advisable, to protect all parties concerned, in the event of one party not holding up their end of the agreement. Ask your contractor to include a termination clause in the contract so that either party can get out of the contract if the terms are not being met. For example, if payments are not made on time and the contractor can no longer buy materials, or if the contractor doesn’t do the work that is agreed upon.
20. Have you had any legal disputes about previous work?
While you may not like the answer, it’s still good to know whether the contractor has been in legal disputes before over their work. You should also find out the outcome of these disputes and why they happened in the first place. Once you know the details, you’ll know if the disputes are a deal breaker or not, however no disputes would be the ideal scenario.
Closing thoughts
Once you’ve asked the questions above, you should have a much better idea of whether the contractor is going to be a good fit for you and your project or whether you should consider other options. There are many contractors, so taking the time to do your homework and ask extra questions is better than working with a contractor who is unreliable. After all, the team you’re working with can make or break your project and then your entire real estate deal.
Lastly, you might also be interested in whether or not you need a contractor’s license to flip houses. While the answer is no, there are some benefits to a contractor’s license that you might not have considered. This article provides more details.